Government Announcements Influencing Markets

It’s been an interesting day - there has been a few announcements coming from government institutions that are influencing the forex markets. There were two notable announcements/news that was directly influencing the Australian dollar. The first was on Wednesday (21/2) night with Glen Stevens, the Reserve Bank of Australia’s (RBA) Governor said in a statement that interest rates were more likely to rise than fall. He also noted that inflation won’t stay above 3 percent or higher. December quarter inflation was a good figure however while aggregate wages has been well contained, businesses have been telling the bank of upward wage pressures. Stevens also notes that it is hard to see a dramatic rise in unemployment. The second announcement came this evening, with Australian treasurer, Peter Costello saying that inflation is within the RBA’s 2 to 3 percent band and looks set to stay there throughout 2007-08.

The two government announcements clearly influenced the Australian dollar in the forex market. The RBA announcement clearly injected some push (initial jump of 20 pips in the hour than a gradual increase up to 79 cents+) to above the 79 cent mark for the currency pair. The announcement was in the evening, Sydney time, so as the London and New York markets opened up, they took on board the news. The sharp fall (about 15 pips on the hour) the next day was from Peter Costello’s comment.

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